News outlets are complaining about Facebook’s terms for TV-quality videos meant to compete with YouTube.
June 19, 2017, 5:00 AM EDT

When Facebook Inc. wants to try something new, one of its first calls is to CNN. It was a key partner when Facebook introduced its news-reading app, Paper, in 2014. When the social network shuttered Paper soon after, transmogrifying it into a series of fast-­loading News Feed stories called Instant Articles, CNN remained on board. And last year, when Facebook began focusing on hosting live video, CNN was one of the few parties to which it paid a nominal fee to produce clips of, say, election results being projected on the Empire State Building.

But strain is showing in the relationship. Facebook’s latest pitch to publishers such as CNN is for them to provide a regular stream of TV-quality, edited, original videos that will give Mark Zuckerberg’s company a chance to compete with YouTube to siphon some of the $70 billion pouring into TV ads each year. In exchange, the publishers can share some of the revenue for ads that roll in the middle of the videos. Facebook will control all the ad sales.

It’s getting tougher for CNN and others to view these arrangements as mutually beneficial. “Facebook is about Facebook,” says Andrew Morse, general manager of CNN’s digital operations. “For them, these are experiments, but for the media companies looking to partner with ­significant commitments, it gets to be a bit of whiplash.” Morse says the financial compensation Facebook offers isn’t enough to convince him that working directly with the social network will be worthwhile in the long term.

Jason Kint, chief executive officer of the industry trade group Digital Content Next, was more blunt. “Media companies are like serfs working Facebook’s land,” he says.

For the past few years, it’s been easy for the company to find news organizations eager to test its latest ideas. The companies rely heavily on Facebook to boost their audiences, especially on mobile devices. Outlets have started to pull back from Facebook partnerships, however, concerned that they’re putting more into the deals than they’re getting out of them.

Creating the stories and videos can be expensive and limit publishers’ direct relationships with readers, according to executives at six news companies. They say Facebook keeps changing what kind of material it’s asking for, and the company doesn’t pay enough or turn over enough data. Several of the executives say they’ll decrease their Facebook commitments unless things improve.

Fidji Simo, Facebook’s vice president for product, says the social network has heard the complaints and has been working to smooth its relationships. Among other things, it’s brainstorming ideas with media outlets rather than simply bringing them lists of demands. Facebook’s head of news partnerships, former NBC news anchor Campbell Brown, who was hired in January, has been hosting dinners and training sessions to hear out the com­panies’ arguments for better compensation. “If journalism isn’t surviving in this environment, that’s bad for society, but it’s also bad for Facebook,” she says. Still, Simo says media com­panies shouldn’t expect to get the upfront payment some are calling for, partly because Facebook rewards viewership and partly because viewership is its own reward.

The news executives say Facebook’s journalism initiatives have so far done little to improve their relationships with the company and that it remains less collaborative—and more skewed toward its own interests—than Apple News, Snapchat Discover, or Google Accelerated Mobile Pages. “If you come to us and say, ‘We want to help,’ I’ve got lots of ideas,” says Suzi Watford, the Wall Street Journal’s chief marketing officer. By the time Facebook offers to help with something, she says, it already has a plan and isn’t interested in further discussion.

The New York Times recently pulled out of Instant Articles, as did the Guardian. Because those articles are hosted on Facebook directly instead of on the publishers’ sites, they haven’t yielded many subscriptions. Facebook has started working with publishers to promote digital subscriptions on Instant Articles. The Times also reduced its production of Facebook Live videos because Facebook’s quotas made it too tough to produce quality clips, says a person familiar with the matter. Facebook’s latest video push will require even more resources, because the videos need editing, but for now the Times is willing to experi­ment with them, the person says.

While Facebook is scouting deals for shows and projects that can compete with YouTube this summer, for now it needs other companies to produce videos its 1.9 billion users will want to watch. And keeping News Feeds full of videos from big-name outlets can help Facebook allay concerns from users—and ­governments—that it’s circulating low-quality ­material or amplifying lies dressed as news.

On June 8, Facebook announced it would allow publishers to put more ads in Instant Articles and said it’s been paying $1 million in total ad revenue daily to the companies using the service. Ben Lerer, CEO of online video machine Group Nine Media (Thrillist, NowThis News, the Dodo), says that while he’s not satisfied by his deals with Facebook, he’s optimistic they’ll improve. Either way, he says, “whining and complaining that Facebook isn’t making you money is probably not going to be the most successful approach to building a partnership with Facebook where they make you lots of money.”

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